When is interest applied by Revenue?
If you do not pay Valued-Added Tax (VAT) on time, you will be charged interest. Interest is charged on a daily basis. This begins from the date the VAT payment is due until you pay the amount outstanding.
Where you have received a refund in excess of the amount due, you will have to pay interest on the overpayment. Interest is payable from the date you received the overpaid amount.
The rate of interest is 0.0274% per day, or part of a day.
Interest on underpayment in direct debit scheme
Revenue can charge interest on any balance that is outstanding at the end of your accounting year.
The date Revenue uses to calculate the interest will depend on the percentage of the annual liability outstanding.
If you have paid 80% or more, Revenue will charge the interest from the due date of your end of year VAT 3 return, until the amount outstanding is paid.
If you have paid less than 80%, Revenue will backdate the interest to a date which is six months prior to the final date for filing your annual VAT return.
- Example 1
John is on direct debit and pays €5,000 per month. His accounting period ends on 31 December.
He files his VAT return on 19 January so his annual liability is €66,000. He has paid over 80% of the actual liability for that accounting period.
He does not pay the remaining outstanding amount of €6,000 until 20 March.
John is charged interest on €6,000 from 19 January to 20 March at a daily rate of 0.0274%.
- Example 2
Kate is on direct debit and pays €5,000 per month. Her accounting period ends on 31 December.
She files her VAT return on 19 January so her annual liability is €80,000. She has not paid 80% of the actual liability for that accounting period.
She does not pay the remaining outstanding amount of €20,000 until 20 March.
Kate is charged interest on €20,000 from 19 July to 20 March at a daily rate of 0.0274%.
Interest on estimates and assessments
Where Revenue estimates your VAT liability, interest due on unpaid VAT is calculated on a daily basis. It starts from the date the VAT was payable.
Where Revenue issues an assessment, interest is calculated on a daily basis from the date the original VAT return was due.
An assessment may include VAT due in respect of more than one taxable period. In this case, interest may be calculated from the last taxable period included in that assessment.
This is the case, even where an appeal is lodged against the assessment.